Transcript No Slide Title

Electricity Supply in the
New Century
Dr Malcolm Kennedy
Chairman PB Power Ltd
including the power businesses of
Merz and McLellan and Kennedy & Donkin
The UK Government main proposals for
the privatisation of the Electricity Supply
Industry in England and Wales; Feb 1988
• Decisions about the supply of electricity should be driven
by the needs of customers.
• Competition is the best guarantee of the customers’ interest.
• Regulation should be designed to promote competition, oversee
prices and protect the customers’ interest in areas where natural
monopoly will remain.
• Security and safety of supply must be maintained.
Price reductions since privatisation
Average real price of electricity for the standard
domestic tariff in England and Wales
Average Price (p/KWh)
876543
1990 1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Business Profits (% of turnover)
1992/3
1994/5
1996/7
Generation
9
14
19
Transmission
26
36
36
Distribution
42
43
43
Supply
1
2
1
1998/2000
The UK story - so far
• Competitive and non-competitive elements in the industry
identified
• Differing corporate strategies apparent
Varying entry into overseas markets
Vertical integration and mergers with other utilities
Takeovers by overseas companies
Merging of supply and other service businesses
• Persistent government and regulatory intervention
Diminishing market power in generation and divestment
of generation plant
Merger policy
Pool Review, introduction of NETA
Fuel policy and the environment
• Benefits
Consumers
Shareholders
Government
European Union (EU) electricity liberalisation
• Competition in generation
- Free market entry, no planning or central planning,
competitive tenders
• Competition in supply
- Negotiated 3rd party access
- Access into single buyer system
• Enforced market opening
- 22% in 1999 at least 33% by 2003, differing rates of
opening
• Transmission charging
• Is competition ‘real’ or imaginary
Main Regions of Activity in
Deregulation of Electricity
Supply Industries




EU and Accession Countries of Central Europe
North America
South America
Australia & South East Asia
Principal Liberalisation Activities






New-build generation & IPPs
Trading in existing generation, transmission &
distribution assets
Competition in generation and supply
Regulation & price control of monopoly businesses
Rapid Development of renewables?
Power exchanges/pools and data transmission
Abundant Fuel ?






Natural Gas
Coal
Oil and other hydro carbons
Hydro
Nuclear
Renewables
Post-Kyoto Development:
Renewable and ‘Efficient’ Energy Sources







Combined heat and power
Energy-from-waste
Wind
Fuel cells
Photo voltaic cells
Bio mass
Mini hydro
Other Post-Kyoto Developments:




Emissions controls
Emissions trading
CO2 capture and storage
Demand side management
Transmission & Distribution
Developments







‘Squeezing’ additional capacity
Extending asset life
Better protection and control
Higher availability and security of supply
Better quality of supply
Reduced maintenance costs
Embedded generation
Worldwide Trends
•
•
•
•
•
•
•
•
•
Dividing utilities into generation, transmission, distribution
and supply businesses.
Widespread introduction of independent Power
Producers.
Splitting existing generation into two or more competing
companies - sometimes.
Operation in accordance with Codes and Licenses and
more accountability to external bodies.
Choice for customers - sometimes.
Mergers, acquisitions and global investment pattern.
Environmental law enforcement and rise of renewables.
Power Pools, where possible.
Increases in efficiency - but who benefits?
Effects on shareholders and their companies
•
•
•
•
•
•
•
Power companies will merge and get bigger and there will be
fewer but bigger global companies.
Mega-Utilities will emerge.
Efficient companies will take over inefficient companies.
Obligation to meet toughening environmental laws means
more renewables.
Further move towards gas and eventually new investment in
nuclear.
More accountability, with monopoly businesses under more
scrutiny.
‘Steady’ stock market performance except if excessive risks
taken overseas.
Governments and Regulators will:
•
•
•
•
•
•
Not abandon ESI to ‘a free market’.
Ensure customer interests, affordability and
environmental requirements are applied.
Insist on transparency of business.
Not allow customer and shareholder interests
to get out of balance.
Oversee rise in Eastern Europe and Middle
East electricity prices.
Have to deal with “cherry picking”.
Customers will:
•
•
•
•
•
See prices change for some time then stabilise.
Enjoy improved customer service response from
power companies.
Have security, quality and reliability safeguarded,
if not improved.
Live in a cleaner environment.
Still take their electricity at 240v and 50Hz
(in most of the world).
Electricity Supply in the
New Century
Dr Malcolm Kennedy
Chairman PB Power Ltd
including the power businesses of
Merz and McLellan and Kennedy & Donkin